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Policy Reforms Making Realty Market An Attractive Platform for NRI investments in India.

With the series of radical and transformational reforms in last two years 2016 and 2017, the NRIs across the globe are anticipating the Indian real estate market to be more transparent, credible and attractive, now as compared to previous time. The Non-Resident Indian (NRI) investment is poised by the accelerated growth with the consolidation of the market by only organised players on the ground.

Globally, most of the NRIs are the employees and the wage earners. The global job market is unstable and this fact forces them to be more realistic while investing in real estate market in India. The other reason was the lack of a trusted platform for those NRIs who wished to invest in properties here.

The opaque nature of the real estate business, lack of information and proper implementation/ processing channels, has always been the cause of concern for NRIs. Also, lack of a proper regulatory mechanism to safeguard against the misleading marketing and non-adherence of property delivery on stated timelines, has always deterred investor’s interest.

However, with transformational reforms and policy changes in previous two years, the Indian real estate market has got the potential to attract more NRI investment. Game Changing Reforms

The policies which revived and influenced NRIs investment decisions are

• Real Estate (Regulation and Development) Act 2016

• Demonetisation

• Foreign Direct Investment (FDI) reforms

• Relaxation of norms in Real estate Investment trust (REITs)

• Goods and Services Tax (GST)

• Benami Transactions (Prohibition) Amendment Act

• Changes in Accounting standards IFRS

These policy reforms are helping to bridge the trust deficit between the institutional/ NRI investors and India's real estate property players. In above all mentioned reforms, RERA has been pivotal in addressing this trust block and boosting confidence in NRI investors.

The relaxation in some of the norms in REITs will directly benefit the commercial real estate property segment, especially retail, office, logistics, warehousing, etc. There has been a consistent rise in demand for commercial spaces like Grade A offices and IT parks in Tier I and Tier II cities. Due to which, NRI investor's focus towards commercial properties has risen considerably, as this sector is delivering more satisfactory yields as compared to residential segment.

Many Indian large realtors are experiencing a revival in NRIs investment plans with most of their upper price segment properties which are RERA compliant are being sold out to customers majorly belonging to NRI community.

Major Factors Influencing NRI Investors

As per the industry experts analysis, NRIs always consider four major factors while investing in Indian property market, they are

• Developers with strong delivery record

• Minimum initial investment

• High rental potential

• RERA compliance

• Status of the land & its use

The interest to invest in real estate sector by NRIs is especially driven by long-term fundamentals like safeguarding retirement plans, emotionally connect, better returns and yield on investment.

Right time for Investment

The experts are stressing that this is the right time for NRI investors as there are more investment growth opportunities, in both residential and commercial real estate market of India. This due to following reasons:

• The property prices in India are at the bottom

• Realtors are rolling out highly attractive prices for all projects which are at par with international standards

• RERA compliance making the market more transparent in all its processes

• Mid-segment and smaller projects with lower price tags are available

The previous pure price-play mechanism of the realty market is now shifting to facts like quality, commitment to deliver on time and right price strategy. The policymakers are continuously working towards simplifying the purchasing processes, rules and regulations prevailing in the real estate market. Further relaxation in FEMA norms and some laws by RBI regarding property buying by NRI Diaspora are likely to give a big boost to their investment in Indian property market.

The year 2017 has been the most eventful year of the decade for the Indian realty market, with major reform policies rolled out, to give a complete overhaul of the system. A bigger section of property developers, have termed 2017 as a year of consolidation and many are wishing, the coming year to be at least steady if not profitable, in the view of all reforms and its related processes, which are not yet much visible and clear at the implementation level.

We are discussing here some of the major factors or trends which will shape the real estate market in the coming new year-2018.

1.Policy Changes

Last year, all real estate property developers of the India faced a short-term turmoil because of structural reforms brought into the system, through various policies - RERA, GST, Benami Transaction Act. Developers remain optimistic for the coming year and taking all policy changes, policy implementation, government initiatives for affordable housing segment and transformation of office space sector, as the major factors influencing buyers'decision.

2.Oversupply of Property

Reports have stated that oversupply of real estate properties especially in affordable housing segment can defeat the purpose. There may be few takers of such properties in the market, so providing optimum level of units as per the demand will work much better in term of ROI.

3.Right Research Right Profit

Launching right size of the project in the right market with right prices, will only help in reaping profits to the developer. The project can be in luxury housing segment or commercial segment, the developer should do his home-work better to attract the right audience available in the market.

4.Luxury Housing with Affordability

Coming year can show better results in luxury housing projects, if they are offered at affordable prices to the customers. As the oversupply of mass houses will rise, buyers who are looking for high-end properties which satisfy their quality and aspirational quotient as well, will also rise. Developers providing quality and style elements at affordable price segment will be defining factor in attracting more consumers.

5.Execution Target

With a lot of projects running behind the schedule and to avoid the RERA penalties, the coming year will see a good supply of houses, all across the Indian real estate market. The developers will prefer to deliver all the running project on time rather than launching a new one. This will help in consolidating the market and prices of all the completed units and buyers will have the most cost-effective rate tag.

6.Consolidation through Joint Ventures

The joint ventures or joint development will be more seen in the real estate market for 2018. The previous or running projects which were fiscally mismanaged and distressed developer with losses, will be over-taken by larger players of the market. This will help in cleaning up the market to some extent and consolidate it with lesser and better real estate development companies. By this consumers will get quality property units with on time delivery.

7.Small Size Projects

With RERA liability on real estate developers for on-time delivery or the projects, they may opt for more smaller projects or split larger projects into smaller phases. This will help them in efficiently managing the running project with better quality and transparent cash transactions or payments. Smaller projects get quickly completed on time, saving the developer from RERA penalties and consumers getting their houses on time.

8.Growth of Tier-II cities

With increasing congestion in metro cities of India, large and medium real estate property developers are evaluating their options of doing business in these cities. Metro city problems and availability of better growth prospects in Tier-II cities of India are attracting large developers to start new projects here. This may influence the property buying behaviour of consumer in both metro and tier-II cities.

9.Inflation and Buying Capability

Market analyst speculates that the growth in the job market and inflation may affect the buying and selling of properties, in 2018 majorly. Better job market prospects can upscale the consumer base in the real estate market considerably.

Our honorable PM Mr.Modi is trying to keep no stone unturned, to drive away corruption from India. After Demonetization many reforms are done in taxation and various structural changes had been brought in to effect, in all major sectors of the economy, including real estate. To overhaul the messy real estate market of India, prior to Demonetization - i.e. scrapping of old 500 and 1000 rupees notes, Benami Act was brought into effect, last year, which was not covered much in the media.

Fight Against Corruption in Real Estate Market

Mr.Modi is trying to plug every loophole of corruption techniques. Buying real estate property in someone else's name is a common practice of wealthy people who buy large properties by evading taxes. All financial and land dealing departments of the government have already stepped up scrutiny measures of real estate assets with suspicious titles.

All moves are to clean up real estate market of India, right from the arcane land record department, loans, construction phases to final completion of registration proceedings.

Law for root-level corruption: Benami Property Act

To put a fight against corruption at the fundamental root-level, i.e. at land acquisition level, a law is enacted called as Prohibition of Benami Property Transaction Act or Anonymous Property Act which is popularly known as Benami Property Act. This law has been brought for those people who often use cash for which they haven't paid taxes on, to buy property and name it in for their trusted relatives or employees. The industry had estimated that about 5-10% of real estate property in many cities are bought by people who want to evade taxes.

How Modi government, is exploring all shortcomings of the law to fish out the culprits?

Sources have confirmed that the government, is specifically, using tax returns filed in July, raids and data from bank transactions to collect information about suspicious real estate property dealings.

1. Inaccuracy of tax law

- The government believes that there are some flaws in the tax laws of the country, due to which mismanagement of Anonymous property and real estate dealings are done in the wrong way.

2. Income Tax Return Filing

- The deposit of the income tax declaration or the filing of income tax returns, until July of this year, is being checked minutely. Suspicious people or companies are being checked first.

3. Recovered Documents in Raids

- The Department of Income Tax has conducted raids in many parts of the country by coordinating them with the rest of the agencies. Among them, there are many cash and gold recovered in addition to important documents which are under scrutiny.

4. Transactions of Bank

- The IT department and the rest of the agencies are tracking certain accounts throughout the country. The operators of these accounts, who have purchased benami properties or invested in the real estate sector by illegal means are under lense.

Which people are more suspicious?

It is believed that political leaders, businessmen and NRI people who have invested in properties in the name of relatives or close friends are under suspicion.

Benami Property Law Directives

The law states that the people who hold assets that don't actually belong to them could face up to seven years in jail, with the seizure of the property.

“PM asserts – No question of retreat.”

It is very clear that the government of India is going to be tough with all wrongful activities happening in all the sectors which are hampering the growth of the nation and its people. With RERA has already been implemented to fight against the unlawful practice followed by a few builders in the market. Benami Act implementation is also sending a strong message to all those people who try to advantage of the loopholes in the system.

This has helped in building trust in consumers for the real estate property developers. It surely brings an atmosphere of transparency, availability of more affordable land property in the Indian market and deters others to amass land property by unlawful means.

The family of the USA's President, Donald Trump is expanding it’s Trump Empire by launching a pair of real estate projects in India. The Trump organization is very bullish as far as Indian real estate market is concerned and is very optimistic in approach to establish itself in Indian real estate market by providing luxury projects to the affluent Indian class.

These two new project launching had caused some murmurs in the political arena in the USA and as well in India, as the Trump Organization had previously said that no new foreign agreement would be signed while the president remains in office.

However, the Trump organization had launched two residential property projects in India, despite concerns over the president's potential conflicts of interest with foreign governments. The developments are the evidence that the Trump Organization's promise does not specifically extend to the projects that were signed or initiated before Mr Trump took office as President of USA.

Real Estate Projects in India

The Trump organizational team has made strong inquires about the existing projects and seems to be incredibly happy with the reports generated even before the launch of the new projects. It is said that the new projects - Kolkatta and Gurgaon projects, were inked before Mr Donald Trump became president of USA.

The two projects, one as the new Trump-branded tower in the eastern city of Kolkatta will cost $ 765,000 or less and the other project in the suburban capital of Gurgaon will have $ 1.8 million apartment cost and access to golf courses. The capital investment in these two projects is much over the existing three projects in cities - Mumbai, Pune and a proposed office in Gurgaon.

The Mumbai project is a 75-storey tower, going to have a shimmering gold facade and two residential towers in Pune. The new project in Gurugram, likely to be called Trump Towers, will be jointly developed by M3M India and the Trump Organization. The project will be a super-premium, ultra-luxurious project.

Real Estate Market Insight

Real estate property analysts and experts are scratching their head and speculating the success of these luxury projects, as the market of real estate in luxury property segment is very sluggish. Their views are that the prices of these properties in last four years had not increased, the stock has grown and the sales have been really bad. They sight that there is a big difference between prevailing prices and what buyers can afford practically.

By analysis reports, till November this year, alone Kolkata had about 428 unsold units in the price range of $ 460,000 to $ 1.5 million, which is a three-year stock delay, while Mumbai had 17,478 unsold units, a six-year delay.

Final Factor

The property market experts view that the Trump brand properties have faced slow sales in the market because of higher cost almost 30% higher than the neighboring real estate projects. Some experts have different view that whether Trump will attract Indian market or not after the period of immigration and other controversies surrounding the Trump policies. It is also viewed that the projects supported by well-known stars and sportsmen do not always work in favor of the builders. Affordability – always remains the main factor in reaping profit in the real estate projects.